11th hour change: school tax rates to increase this year

Due to a recent change in the Spafford town equalization rates, residents in the town of Skaneateles — as well as district residents in Marcellus and Sennett — will pay a nearly 4 percent increase in their tax rates beginning in September.

This is a significant raise over the previously projected tax rate increase for the 2011-12 school year.

At the Aug. 23 meeting, the Skaneateles School Board voted to reduce the increase by taking money out of the reserve fund and moving it into the revenue fund, but this action hurts the previously planned budget stabilization process and will likely lead to lower levels of reserves, which could be used to offset future revenue shortfalls.

The Skaneateles school superintendent, assistant superintendent/business manager, board president, and board members all were upset by the unexpected turn of events, and were adamant in their desire to assure district residents that the tax rate increase is not a tax levy increase; it is not because the district is spending extra money, but is rather a redistribution of the amount certain district residents are paying.

“The shame of this is that we have made so many strides this year [to tame the budget] and then to get this curveball,” said superintendent Phil D’Angelo. “Whatever we do we’re compromising down the road. This is putting us in a very difficult position — we either pay now or we pay later.”

At issue is the 2011 tax warrant for the towns comprising the Skaneateles school district.

“This has been a headache for the past week,” district assistant superintendent and business manager Dale Bates told the board.

The budgeted tax rate increase for the district was 2.8 percent for the 2011-12 school year.

The town of Niles lost one-tenth of one percent of its warrant, which shifts a slight tax burden to the other towns in the district. But the “big surprise,” Bates said, was that the town of Spafford received an equalization rate that was set at 109 percent.

“This came out of the blue at us and causes a pretty dramatic shift in dollars,” Bates explained.

Equalization rates

According to the State Office of Real Property Tax Services, equalization seeks to measure the relationship of locally assessed values to an ever-changing real estate market. At its simplest, an equalization rate is the state’s measure of a municipality’s level of assessment. This is the ratio of total assessed value to the municipality’s total market value.

An equalization rate of 100 means that the municipality is assessing property at 100 percent of market value; an equalization rate of greater than 100 means that the total assessed value for the municipality is greater than its total market value.

The Real Property Tax Law requires that annual state equalization rates be established for each county, city, town and village. Equalization rates are calculated each year to reflect that year’s assessment roll and current market values for each assessing unit.

In order for a school district to fairly distribute its property tax levy (the total amount of school taxes to be collected), the levy needs to be divided in proportion to the total market value of each municipal segment. This is intended to allow for an equitable distribution of taxes based upon the market value of each municipality or segment.

The district had projected Spafford to have an equalization rate of 100 percent. At 109 percent, a large portion of the tax levy that was expected to be paid by Spafford now shifts to Skaneateles and the other towns in the district. As a result, Spafford will have a reduction in its tax rate.

Only 14 towns in the entire state were equalized at more than 100 percent, Bates said.

Unexpected news

The news came unexpectedly to the district because Bates only received all the final equalization numbers for its towns from the state last Tuesday, Aug. 16, which was when Bates was able to spreadsheet all the numbers and assess the impact.

“I just couldn’t believe it when that number came out,” Bates said.

District Superintendent Phil D’Angelo characterized the late release date as an “11th hour” incident that was “a total unexpected surprise.”

Another issue in this tax rate equation is that the Town of Skaneateles assessment values dropped 1.1 percent, which is almost $13 million.

Spafford assessment values dropped $1.7 million, which is about 0.7 percent. However, if you apply the equalization rate to develop a “true value” figure, the decrease for Spafford is really 8.6 percent, or about $23 million, Bates said.

This occurred because Spafford real estate and home sales were lower than its assessments. In fact, property values in Spafford have decreased by nearly 10 percent, said Spafford Town Assessor Kim Stone-Gridley. “Unfortunately the culprit is the economy,” she said.

Stone-Gridley explained that the town did not apply for the new equalization rate, it was assigned to the town by the state.

Spafford did a revaluation of its assessed values in 2009 and was assigned an equalization rate that year of 100 percent by the state. That revaluation was based on the 2009 assessments which were based on values prior to that year. Since then, properties values have fallen.

“That happens in any town,” Stone-Gridley said. “And when you have a town as diversified as Spafford, with two different lakes and a rural side, neighborhoods appreciate at different rates.”

“I believe we are not too far off the 100 percent, but the state says no — I don’t believe all my properties have decreased 10 percent,” Stone-Gridley said.

Next year, she added, if sales start increasing then the town’s equalization rate will change.

School Board action

Because of the changed Spafford equalization, it loses more than 1 percent of its tax levy, and Skaneateles gains more than 1 percent on its tax levy.

That increase, if no action were taken by the board of education, would mean that Skaneateles — and also district residents in Marcellus and Sennett — would see a 5.49 percent tax rate increase for the upcoming school year, while Spafford would see a 3.5 percent tax rate decrease, Bates said.

He explained that with that increase, a $100,000 assessment currently at a $35.28 tax would become, if the board did nothing, $72.

The entire school board agreed with a statement made by board member Michael E. Card when he said, “5.49 percent is totally unacceptable.”

Bates told the board the only feasible way to confront this was to take money out of the district reserve fund and move it to the revenue fund to offset the losses, which would then lessen the tax rate increase. The reserve fund comes from yearly budget surplus savings.

Bates said that to keep the tax rate where it is at the previously budgeted 2.8 percent increase, they would have to add $650,000 to the revenue fund. He suggested that the board should keep the increase under 4 percent, and to make it 3.9 percent would take an addition of $325,000 to the revenue fund from the reserve fund.

The district already had budgeted to take $100,000 out of the reserve fund this year to offset tax rate increases.

Bates said this situation of equalization rate changes occurred before a few times in the 1990s, but this time was different because back then the district was receiving state aid (which they are not this year), the assessment value of Skaneateles was not decreasing, and the district did not have to dip into the reserve funds. “We were never facing [in the 90s] what we face today,” Bates said.

While discussing the issue, the board was unanimous in its concern that district residents might misunderstand what was going on and why the tax rate was increased. They did not want to lose credibility by being mistakenly seen as exceeding their voter-approved budget.

“The voters voted [in May] for a 2.78 percent increase in the budget and that’s what we did: 2.78 percent. This is all about who pays what,” said board member Thomas E. Lambdin.

“The key to this situation is that the shift in the tax burden is totally out of the district’s control,” Bates said after the meeting. “This is a redistribution of the tax levy based on the equalization rate set up by the state.”

The board agreed to put out a letter to all district residents to explain the situation and ask for assistance from everyone. “I think the community will support that,” board president Evan Dreyfuss said.

After a lengthy discussion, the board voted unanimously in favor of shifting $325,000 from the reserve fund to the revenue fund and accepting the “compromise” tax rate increase of 3.9 percent — between the original 2.8 percent and the total 5.49 percent.

The Town of Spafford now moves to a 5 percent decrease in its tax rate.

The current balance of the district’s reserve fund is just over $400,000, so this move, added to the previously budgeted $100,000 taken from the reserve fund, will basically wipe that account out, Bates said.

“It’s a good thing he had the reserve or the impact would be higher,” Bates said. However, the money in that fund was part of the district’s five-year plan on how to use its reserves, and this use of it basically loses one year of funding from that plan.

The new 3.9 percent tax rate increase will become effective with the upcoming school tax bills going out to district residents in early September.

Jason Emerson is editor of the Skaneateles Press. He can be reached at editor@skaneatelespress.com.